New FTC Guides Impact Use of Social Media for Companies and Athlete Endorsers

Article excerpt

Introduction

In 2012, Nike became the first company in the United Kingdom to have a Twitter campaign banned after the Advertising Standards Authority (ASA), the U.K.'s equivalent of the United States' Federal Trade Commission, held that soccer star Wayne Rooney had violated rules for clearly communicating to the public that his tweets were advertisements for Nike (Furness, 2012). Nike, through its endorsement deal with Rooney, encouraged Rooney to engage in Twitter messaging as part of its wider "Make It Count" advertising campaign. Rooney's tweet, which went out to his 4.37 million followers, said: "My resolution - to start the year as a champion, and finish it as a champion...#makeitcount gonike.me/make it count." As stated by the ASA, "We considered that the Nike reference was not prominent and could be missed. We considered there was nothing obvious in the tweets to indicate they were Nike marketing communications" (Furness, 2012).

Athlete endorsement deals have historically been rather straightforward transactions. In exchange for a monetary or in-kind compensation, the company uses the athlete's name and likeness in its advertising and promotion campaigns, and the athlete typically wears apparel that features the company's logo, uses the company's products/services, and makes appearances on behalf of the company. However, the emergence and popular acceptance of social media platforms such as Facebook, Twitter, and YouTube have greatly expanded the playbook for promoting endorsement deals, for both companies and athletes alike. Such social media "advertising" has also recently led to substantial revisions of the guidelines governing commercial endorsements and testimonials (McKelvey & Masteralexis, 2011).

Seeking to address a landscape now more commonly known as the Twitterverse and blogosphere, the Federal Trade Commission ("FTC") in 2009 established new guidelines of engagement for companies and endorsers seeking to leverage social media to promote products and services (Guides Concerning the Use of Endorsements and Testimonials in Advertising, 2009). Although the Guides specifically refer only to endorsers, it is clear that the Guides are meant to apply to athletes as well as celebrity entertainment endorsers. The new Guides establish that both advertisers and endorsers must disclose "material connections" between companies and athlete endorsers (Guides, § 255.1). The Guides additionally clarify that endorsers have a duty to disclose their relationships with companies when making endorsements outside the context of traditional advertising in which the audience would not otherwise reasonably expect that a financial connection exists between the celebrity and the advertiser. Given the requirements of the new Guides, companies utilizing athlete endorsers should fully understand the rules, as well as the potential liability, for athlete endorsers' use of social media platforms.

Overview of FTC Guides

The FTC periodically publishes so-called Guides (administrative interpretations of the laws) in order to inform the public and businesses. The Guides are a basis for voluntary compliance with standards imposed by the law. Failure to comply with the Guides typically results in demands for "corrective action" by the FTC; however, under the Federal Trade Commission Act, violators may be subject to substantial fines based on the ability of the FTC to bring legal actions in federal district court if the alleged company or endorser refuses to take corrective action.

In enacting the new Guides (the first update in 29 years), the FTC acknowledged the novel questions that social media have posed about how to distinguish between communications that are considered "endorsements" within the meaning of the Guides and those that are not. According to the new Guides, an endorsement is defined as:

any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. …